In a world of assumptions….An auto enrolment prediction

All of us know that in our profession we need to make a lot of assumptions. We gather plenty of hard facts, we work really hard to truly understand our clients needs but then there is a certain leap.  There are plenty of ‘unknowns’ where we have to make assumptions about to help build their financial plan.

Assumptions are just that and we tend to draw the line at ‘prediction’.  Prediction, especially when there’s a bunch of unknowns, can be a pretty dangerous game.  I usually try to stay on the safe side of that fine line.

However today I want to be bold.  I want to stick my head above the parapet. I want to make a few predictions…

Our business model will change

Over the next 18 months the majority of my new client conversations won’t be about our private client services.  I will  be spending the majority of my time helping companies ensure they comply with the auto enrolment regulations.  However this isn’t a particularly bold statement to kick things off (as you’d hope I’m in control of the direction of my business!).  Let’s move on….

We will being “saying no” as lot

We will, very shortly, have to start saying no to employers who want to engage with us.  Not because of capacity or relationships (although they are factors we intend to keep a very close eye on in the coming months) but because they have simply left it too late for us to get them to comply before their staging date.

“The workplace” will become the “new retail”.  

Whilst previously individuals had access to ‘advice’ through the local branch of their bank (or were sold financial products) this mass distribution channel is now all but finished.  However with a far higher engagement in workplace pensions over the coming two years I believe that the distribution of advice will shift and individuals will be looking for advice in some form provided in their office.

Many professionals will regret not taking more notice

We’re talking to a lot of fellow financial planners and IFA’s at the moment. We’re also talking to loads of accountants and solicitors. What we’re finding is strange. Whilst there are a select few who are getting really engaged with their clients….Auto enrolment for many professionals is being treated like it’s still tomorrows problem.

However when you consider that ever employer who employs over 62 people (or did in April 2012) will need to comply in less than a years time (and thats without talking about the million of smaller employers who will need to comply in the upcoming years) I’d suggest.

If your proposition, regardless of your profession (but this in my opinion mainly impacts accountants, lawyers and those involved in the  financial services sector), includes some form of professional service to business owners you need to be talking to your employer clients and you need to be doing it sooner rather than later.

I’m a business owner and if I wasn’t aware of auto enrolment or I’d heard about it but didn’t realise the impact I’d expect my Accountant, Lawyer and IFA to let me know how the changes impact me and my business and I’d be pretty disappointed if they didn’t!

——————————————–

The interesting thing about predictions is that very often they are quite far off the mark (we see that all the time in our line of business!).  However I’m quite confident that at least some of mine will be true….

* I know that our business model has already changed and will continue.

* Whilst we are engaged with 3 larger employers (who have between 700 and 1500 employees each) with auto enrolment preparation at the moment but had to decline working with a scheme yesterday (with 1500 employees) due to the fact that they had left it too late (they had 1 month to go until they ‘staged’).

* The ‘workplace replaces retail’ and ‘professionals will be caught out’ predictions are more speculative but come from an assumption that individuals will always look for a convenient yet trusted option to seek advice (if this is true…workplace replacing retail fits) and conversations I’ve had with numerous employers (along the lines of ‘my accountant/lawyers/current IFA hasn’t told me about this’).

Now I might be right on all points (if so, I might change my name to NostraDaemsus….sorry bad joke!).  I might be completely wrong. However I’m more interested in what you think….I look forward to hearing from you

 

 

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16 thoughts on “In a world of assumptions….An auto enrolment prediction

  • Great article, I think there are tremendous opportunities here for businesses to improve and display employer/employee relations within their firms. And who are the employees going to turn to for further financial advice? Well I would have thought those who have arranged their pension facilities will be first in line, as you quite rightly point out. Good luck with it.

    Reply
    • Thanks Danielle,

      I really like your approach. Employers can see and communicate the changes in a positive way and use auto enrolment as an opportunity to engage with their staff.

      Thanks again for your comment….

      Reply
  • Good article. I dont think any of us can predict the outcome of the AE tsunami.
    We’re part of an accountancy practice, and I have spent a lot of time talking to the partners about the opportunity for them.
    Clearly, if we can sell an auto-enrolment solution to an employer, they can sell payroll services, and it’s only one step from there for the accountant to pick up the full accountants and audit services.
    I think they got it when I told them that other accountants would be approaching their clients in the same way.
    What makes me nervous is the potential cost of setting up an auto-enrolment scheme. I think that, for many small businesses, there will be a choice of paying us (an amount which, to them, feels like) a lot of money, or spending hours trying to do it themselves, and probably failing.

    Reply
    • Thanks for your comment Phillip. For every business there will have to make a choice. Either DIY auto enrolment or get someone in to do the job.

      In any small business you’ve got to make this choice. However if anything suits a systemised process it’s auto enrolment and there are plenty pieces of kit which can help you and your clients with the task.

      From the perspective of the accountancy practice their approach makes sense. It’s part business protection (ensuring you have something in place to ‘compete’ with other accountants) and part business opportunity (so that you can add value to the clients of accountants who haven’t thought about AE yet).

      However I’ve got a feeling that with the number of employers needing to comply competition won’t be a huge issue!

      Reply
  • Given the ongoing dialogue of shrinking demand and reluctance to pay are we not completely missing the point by discussing employers rather than employees.

    These schemes are not optional so would it not be better to focus on developing ways of engaging the employees ?

    Yes it means a lot of hard work for less money but the future will be amazing for those advisers willing to grasp this wonderful business opportunity

    People do want to have the confidence that saving for their futures is worthwhile and now we have been given a blank canvas to provide just this.

    Reply
    • Hi Phil,

      You make some interesting points…..

      You’re right to say that complying with auto enrolment for employers is compulsory. However this means that for the purposes of auto enrolment the ‘client’ is the employer.

      Ensuring we get auto enrolment properly administered for the employer is key to future employee engagement. I believe that if the team within the business seeing everything being processed smoothly and administered well it’s the first step towards building a relationship of trust with everyone in the business.

      However it’s important not to underestimate the impact auto enrolment already has had in helping people save for their financial futures. Although we are in the early stages of auto enrolment there are already 1 million new pension savers due to the regulation!

      I think you’re right…..we are already looking at business models designed to provide a direct service to the employees who sit within the schemes we look after.

      However we need to make sure that providing a service is commercially viable for the business….and that is proving to be a bit of a challenge! I’m sure we’ll get there and I’m sure it will have to utilise technology in some way shape or form!

      Reply
  • Without being pedantic I do believe that all thinking should start with the people who will be our futures and who will be the employees if the proposition is right.

    In our business when we had moved over to a wrap based service proposition in 2004 we migrated all of our GPP accounts over to Transact.

    The impact that giving every individual an online account had on both the employer and the employee has been staggering and extremely profitable.

    From having the usual unproductive and tedious work involved with provider based arrangements we progressed quickly to a level of engagement with all concerned that we had never thought possible.

    The employers quickly began to see real value from the cost of their employee benefit packages and the employees quickly found real interest in the savings process.

    We have rarely lost an employee client through job changes and have attracted large amounts of money from ” frozen ” pensions or from savings held elsewhere.

    Perhaps not the place to go into too much detail suffice it to say that in just four years we had grown a recurring income from monthly contributions of more than £75k pa. and an aggregate fund value exceeding £5 million on which we also receive income.

    All of our work in this area is done electronically using existing technology. Happy to elaborate if anyone is interested in something that already works.

    Reply
    • Thanks Phil….I for one would be interested in understanding a little more about how your proposition works…would it be Ok for me to give you a call when I get back from my holidays?

      However what I don’t understand is how having all the pensions under one platform solves the systems issues that employers will face when the auto enrolment legislation impacts them? (unless Transact provide a piece of technology designed to ensure employers comply with Auto Enrolment rules…however I’m not sure they do).

      Also, are the schemes set up on a ‘new model’ charging basis. If not, is there the potential the income could be ‘switched off’ eventually?

      In addition to this would the income you receive come under the remit of ‘consultancy charging’ and therefore be under close focus due to the FCA’s seemingly not being a fan of this charging style?

      I’d be interested in picking up with you to understand more about your thoughts and to see if I can learn about how you do things. Would you mind if we speak in a couple of weeks?

      Reply
  • Good article. I dont think any of us can predict the outcome of the AE tsunami.
    We’re part of an accountancy practice, and I have spent a lot of time talking to the partners about the opportunity for them.
    Clearly, if we can sell an auto-enrolment solution to an employer, they can sell payroll services, and it’s only one step from there for the accountant to pick up the full accountants and audit services.
    I think they got it when I told them that other accountants would be approaching their clients in the same way.
    What makes me nervous is the potential cost of setting up an auto-enrolment scheme. I think that, for many small businesses, there will be a choice of paying us (an amount which, to them, feels like) a lot of money, or spending hours trying to do it themselves, and probably failing.

    Reply
    • Thanks for your comment Phillip. For every business there will have to make a choice. Either DIY auto enrolment or get someone in to do the job.

      In any small business you’ve got to make this choice. However if anything suits a systemised process it’s auto enrolment and there are plenty pieces of kit which can help you and your clients with the task.

      From the perspective of the accountancy practice their approach makes sense. It’s part business protection (ensuring you have something in place to ‘compete’ with other accountants) and part business opportunity (so that you can add value to the clients of accountants who haven’t thought about AE yet).

      However I’ve got a feeling that with the number of employers needing to comply competition won’t be a huge issue!

      Reply
  • Without being pedantic I do believe that all thinking should start with the people who will be our futures and who will be the employees if the proposition is right.

    In our business when we had moved over to a wrap based service proposition in 2004 we migrated all of our GPP accounts over to Transact.

    The impact that giving every individual an online account had on both the employer and the employee has been staggering and extremely profitable.

    From having the usual unproductive and tedious work involved with provider based arrangements we progressed quickly to a level of engagement with all concerned that we had never thought possible.

    The employers quickly began to see real value from the cost of their employee benefit packages and the employees quickly found real interest in the savings process.

    We have rarely lost an employee client through job changes and have attracted large amounts of money from ” frozen ” pensions or from savings held elsewhere.

    Perhaps not the place to go into too much detail suffice it to say that in just four years we had grown a recurring income from monthly contributions of more than £75k pa. and an aggregate fund value exceeding £5 million on which we also receive income.

    All of our work in this area is done electronically using existing technology. Happy to elaborate if anyone is interested in something that already works.

    Reply
    • Thanks Phil….I for one would be interested in understanding a little more about how your proposition works…would it be Ok for me to give you a call when I get back from my holidays?

      However what I don’t understand is how having all the pensions under one platform solves the systems issues that employers will face when the auto enrolment legislation impacts them? (unless Transact provide a piece of technology designed to ensure employers comply with Auto Enrolment rules…however I’m not sure they do).

      Also, are the schemes set up on a ‘new model’ charging basis. If not, is there the potential the income could be ‘switched off’ eventually?

      In addition to this would the income you receive come under the remit of ‘consultancy charging’ and therefore be under close focus due to the FCA’s seemingly not being a fan of this charging style?

      I’d be interested in picking up with you to understand more about your thoughts and to see if I can learn about how you do things. Would you mind if we speak in a couple of weeks?

      Reply
  • Given the ongoing dialogue of shrinking demand and reluctance to pay are we not completely missing the point by discussing employers rather than employees.

    These schemes are not optional so would it not be better to focus on developing ways of engaging the employees ?

    Yes it means a lot of hard work for less money but the future will be amazing for those advisers willing to grasp this wonderful business opportunity

    People do want to have the confidence that saving for their futures is worthwhile and now we have been given a blank canvas to provide just this.

    Reply
    • Hi Phil,

      You make some interesting points…..

      You’re right to say that complying with auto enrolment for employers is compulsory. However this means that for the purposes of auto enrolment the ‘client’ is the employer.

      Ensuring we get auto enrolment properly administered for the employer is key to future employee engagement. I believe that if the team within the business seeing everything being processed smoothly and administered well it’s the first step towards building a relationship of trust with everyone in the business.

      However it’s important not to underestimate the impact auto enrolment already has had in helping people save for their financial futures. Although we are in the early stages of auto enrolment there are already 1 million new pension savers due to the regulation!

      I think you’re right…..we are already looking at business models designed to provide a direct service to the employees who sit within the schemes we look after.

      However we need to make sure that providing a service is commercially viable for the business….and that is proving to be a bit of a challenge! I’m sure we’ll get there and I’m sure it will have to utilise technology in some way shape or form!

      Reply
  • Great article, I think there are tremendous opportunities here for businesses to improve and display employer/employee relations within their firms. And who are the employees going to turn to for further financial advice? Well I would have thought those who have arranged their pension facilities will be first in line, as you quite rightly point out. Good luck with it.

    Reply
    • Thanks Danielle,

      I really like your approach. Employers can see and communicate the changes in a positive way and use auto enrolment as an opportunity to engage with their staff.

      Thanks again for your comment….

      Reply

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